[Federal Register Volume 62, Number 127 (Wednesday, July 2, 1997)]
[Notices]
[Pages 35870-35872]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-17319]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-38781; File No. SR-NASD-97-41]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by National Association of Securities Dealers, Inc. Relating to 
the Definition of Branch Office in Rule 3010

June 26, 1997.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on June 17, 1997, the 
National Association of Securities Dealers, Inc. (``NASD'') filed with 
the Securities and Exchange Commission (``SEC'' or ``Commission'') the 
proposed rule change as described in Items I, II, and III below, which 
Items

[[Page 35871]]

have been prepared by NASD Regulation, Inc. (``NASDR'').\2\ The 
Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1) (1988).
    \2\ The proposed rule change has not yet been approved by the 
NASD Board of Governors. Accordingly, the NASD has consented to an 
extension of the period of time specified in Section 19(b)(2) of the 
Act until at least thirty-five days after it has filed an amendment 
advising the Commission of the action taken by the NASD Board of 
Governors. See letter from Craig L. Landauer, Associate General 
Counsel, NASD Regulation, to Mignon McLemore, Division of Market 
Regulation, SEC, dated June 24, 1997.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    NASDR is proposing to amend Conduct Rule 3010 of the NASD, to 
create another exception to the definition of branch office. Below is 
the text of the proposed rule change. Proposed new language is in 
italics.
3010. Supervision
    (g) Definitions
* * * * * * *
    (2) ``Branch Office'' means any location identified by any means to 
the public or customers as a location at which the member conducts an 
investment banking or securities business, excluding:
* * * * * * *
    (D) any location where a person conducts business on behalf of the 
member occasionally and exclusively by appointment for the convenience 
of customers, so long as each customer is provided with the address and 
telephone number of the branch office or OSJ of the firm from which the 
person conducting business at the non-branch location is directly 
supervised.
* * * * * * *

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the NASD included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The NASD has prepared summaries, set forth in Sections 
A, B, and C below, of the most significant aspects of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    The definition of a branch office, found in NASD Rule 3010, 
includes any location identified by any means to the public or 
customers as a location at which the member conducts an investment 
banking or securities business, subject to several exceptions. If a 
business location of a member meets the definition of a branch office, 
such office must be identified to the NASD through the filing of a 
Schedule E to Form BD and such location is subject to an annual NASD 
fee of $75.00. Several members have asked for guidance from NASDR staff 
as to the application of the branch office registration requirements 
where a business location is used exclusively for appointments from 
time to time between registered representatives and customers.
    This issue may arise under networking arrangements between NASD 
members and banks. In this context, registered persons of the member 
may periodically schedule appointments with bank customers at a bank 
location where the NASD member conducts no securities activities. Under 
the Interagency Statement on Retail Sales of Non-deposit Investment 
Products, banks are required to use signage at the place of the 
appointment to identify the NASD member that employs the registered 
person.\3\ This use of signage at the appointment may imply the need 
for the location to register as a branch office. The NASD is proposing 
to create another exception to the definition of branch office to 
address this type of situation.
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    \3\ Board of Governors of the Federal Reserve System et al., 
Interagency Statement on Retail Sales of Non-deposit Investment 
Products, at 10 (February 15, 1994).
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    The proposed amendment would add language to paragraph (g) of Rule 
3010 to exempt from the branch office definition certain locations 
where a person conducts business for the member firm occasionally and 
by appointment only for the convenience of customers, and where the 
member maintains no other tangible presence. To be consistent with 
other provisions of Rule 3010, the person conducting business at such 
locations would be required to provide each customer with the address 
and telephone number of the branch office or office of supervisory 
jurisdiction (``OSJ'') of the firm from which the person who is 
conducting the meeting is supervised.
    The NASD believes that the proposed rule change is consistent with 
the provisions of Section 15A(b)(6) \4\ of the Act. The NASD believes 
the proposed rule change will provide clarification regarding branch 
registration requirements and will ease the filing burden of many 
members without compromising the ability to monitor compliance.
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    \4\ Section 15A(b)(6) requires that the rules of the Association 
be designed to prevent fraudulent and manipulative acts and 
practices, to remove impediments to and perfect the mechanism of a 
free and open market, and in general, to protect investors and the 
public interest.
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The NASD does not believe that the proposed rule change will result 
in any burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    Written comments were neither solicited nor received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Within 35 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which the self-regulatory organization consents, the Commission will:
    A. By order approve such proposed rule change, or
    B. Institute proceedings to determine whether the proposed rule 
change should be disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing. Persons making written submissions 
should file six copies thereof with the Secretary, Securities and 
Exchange Commission, 450 Fifth Street, N.W., Washington, D.C. 20549. 
Copies of the submission, all subsequent amendments, all written 
statements with respect to the proposed rule change that are filed with 
the Commission, and all written communications relating to the proposed 
rule change between the Commission and any person, other than those 
that may be withheld from the public in accordance with the provisions 
of 5 U.S.C. 552, will be

[[Page 35872]]

available for inspection and copying in the Commission's Public 
Reference Room. Copies of such filing will also be available for 
inspection and copying at the principal office of the NASD. All 
submissions should refer to the file number in the caption above and 
should be submitted by July 23, 1997.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\5\
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    \5\ 17 CFR 200.30-3(a)(12) (1996).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 97-17319 Filed 7-1-97; 8:45 am]
BILLING CODE 8010-01-M